Two community banks want to supercharge their consumer lending by outsourcing it to a new entrant in that field.
Competix Business Solutions, a joint venture of Bank of Montreal and American Management Systems Inc., has won contracts from $84 million-asset BankWest of Goodland, Kan., and $85 million-asset Signature Bank of Springfield, Mo.
The banks will tap into software Bank of Montreal has been using for years to make credit decisions in a matter of seconds.
Signature Bank, which has been doing its lending manually, was shopping for software when it discovered Competix. The outsourcer requires users to have only personal computers with Internet access, said Randall Doennig, vice president of consumer lending.
Signature plans to have lenders with Internet-connected laptops make immediate credit decisions on site at home-improvement and boat shows. Also, loan applications will be available on its Web site.
The bank expects to at least double its $20 million of consumer loan volume without adding staff, Mr. Doennig said.
Agriculture-oriented BankWest sought Competix's help to deal with small consumer loans that tended to "get shuffled in between" larger lines of credit requested by farmers, said Jerry D. Rank, president.
Competix will shorten the time for credit reports and background checks "without requiring the attention of higher-paid loan officers," Mr. Rank said.
He said Competix should help the bank boost its consumer loan portfolio- now at $2.5 million out of a total of $65 million-by 30% to 40%.
Competix is the latest of a new breed of outsourcers in consumer lending, a field where banks are expected to increase spending to $220 million in 2000 from $91.2 million in 1997, according to Tower Group of Needham, Mass.
In a report last year, Tower Group identified three providers-Bisys Creative Solutions of Atlanta, Anytime Access of Sacramento, Calif., and Lending Solutions Inc. of Elgin, Ill.-that accept loan applications over the phone and respond, usually within an hour, by phone or electronic mail.
Credit Management Solutions Inc. of Columbia, Md., and Electronic Data Systems Corp. of Plano, Tex., focus more on processing applications than on making credit decisions, Tower said.
Using the Internet, Competix lets banks gain "quick access to powerful technology on a fee basis," said William E. Stoner, executive officer of Competix. The service also handles a wider variety of loan types than the other outsourcers and incorporates more complex decision-making logic, said Michael McEvoy, senior analyst in Tower Group's consumer credit group.
The American Management Systems software in Bank of Montreal's data center can respond to Competix customers' loan requests in 18 to 20 seconds.
Bank of Montreal uses the system to automatically answer 80% to 85% of its requests for mortgages, credit cards, student loans, and small-business lines of credit. The system accepts more than one million loan applications a year from the bank's branches and, increasingly, from its Web site.
Over the years, the system has allowed the bank to pare its number of credit officers significantly, said Jane Weatherbie, vice president of personal lending services. It also has reduced loan losses, which she attributes to the greater standardization of decision-making.